U.S. Stocks Rebound on Retail Sales; Treasuries, Yen Fall

U.S. stocks rose, with benchmark indexes rebounding from their biggest drops this year, while Treasuries retreated as retail sales climbed more than economists predicted in December. Emerging-market stocks fell and the yen weakened while natural gas gained a third day.

The Standard & Poor’s 500 Index added 1.1 percent by 4:30 p.m. in New York, the biggest one-day advance since Dec. 18 after sliding 1.3 percent yesterday. Treasuries fell for the first time in four days. The MSCI Emerging Markets Index slipped 0.2 percent and European stocks climbed. Japan’s Topix Index sank the most since August and the yen lost 1.2 percent to the dollar after the nation posted a record current-account deficit. Gas futures jumped 2.2 percent while gold retreated.

U.S. retail sales rose 0.2 percent last month, beating the 0.1 percent increase projected by economists as consumers bought holiday gifts. Federal Reserve board members Charles Plosser and Richard Fisher separately called for an end to the central bank’s monthly bond-purchase program after Atlanta Fed President Dennis Lockhart backed reductions yesterday. JPMorgan Chase & Co.’s fourth-quarter profit dropped while Wells Fargo & Co.’s net income rose as major banks began reporting results.

“We’re probably at the stage in the stock market cycle where good news will continue to be seen as good news,” Martin Leclerc, founder of Barrack Yard Advisors LLC, which oversees $270 million, said by phone. “I would say that after this massive move we’ve had it does feel like the animal spirits are still resurrected.”

Valuations, Fed

Today’s rebound trimmed the S&P 500’s drop in January to 0.5 percent after the gauge yesterday capped the worst start to a year since 2009. The Dow Jones Industrial Average climbed 0.7 percent after sinking 1.1 percent yesterday.

The S&P 500 trades at 15.6 times estimated earnings, exceeding its 14.1 average multiple over the past five years, according to data compiled by Bloomberg, as three rounds of Fed stimulus helped propel stocks higher. The S&P 500 climbed 30 percent in 2013, its biggest annual jump since 1997.

Last week’s weaker-than-estimated U.S. payrolls report shouldn’t discourage central-bank policy makers from pursuing cuts to asset purchases after they announced the first $10 billion reduction last month, Lockhart, who won’t vote on policy in 2014, told reporters yesterday. The economy was on a “solid footing,” he added.

Plosser, an opponent of bond purchases, said today that the Fed’s decision to taper was the right move and that the economy is on “firmer footing.” Fisher said he “would have preferred to pull back our purchases by double the announced amount.” Fed policy makers next meet Jan. 28-29.

Time Warner

Yields on 10-year Treasury notes rose four basis points, or 0.04 percentage point, to 2.87 percent, Bloomberg Bond Trader data today showed.

Shares of Time Warner Cable Inc. climbed 2.7 percent after the company rejected an acquisition offer from Charter Communications Inc. Intel Corp. and Jabil Circuit Inc. paced gains among technology companies, rising at least 3.9 percent as analysts upgraded their stock. Intuitive Surgical Inc. rallied 6.8 percent after sales beat analysts’ estimates. JPMorgan rose 0.1 percent while Wells Fargo gained 0.1 percent after reporting fourth-quarter results.

Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. are also set to report earnings this week. Earnings for companies in the S&P 500 probably climbed an average 4.9 percent in the fourth quarter, while sales probably increased 1.8 percent, according to analyst estimates compiled by Bloomberg.

Earnings Season

“Earnings are going to dominate for the next two or three weeks,” Patrick Kaser, a managing director and portfolio manager at Brandywine Global Investment Management in Philadelphia, said by phone. His firm oversees about $50 billion. “People are concerned about the rate of growth in the economy right now. How we finished the quarter going into January, I think that’s going to matter the most for where we are right now.”

MSCI’s emerging markets gauge trimmed an earlier drop of as much as 0.6 percent. Benchmark indexes in Russia and Turkey erased earlier declines. The Turkish lira weakened 0.2 percent to 2.1835 per dollar after weakening as much as 0.8 percent to 2.1974 after data showed that the country’s current-account deficit widened.

South Africa’s rand slumped to a five-year low on concern labor disputes at the world’s three biggest platinum producers will weigh on mining output and dent the country’s exports. The currency declined as much as 0.7 percent to 10.8952 per dollar, the weakest intraday level since October 2008.

Dollar Gains

The dollar gained for the first time in four days, with the Bloomberg Dollar Spot Index rising 0.4 percent.

Japan’s currency slipped against all 16 of its major counterparts after the nation’s current-account shortfall widened more than economists projected in November. The yen weakened to 104.22 per dollar, posting the biggest one-day decline since Dec. 18 after rising to 102.86 per dollar yesterday. The yen dropped 1.2 percent per euro, while the dollar was little changed at $1.3679 per euro.

Japanese index futures rose, with contracts on the Nikkei 225 Stock Average gaining 1.2 percent to 15,685 in Chicago after jumping 1.3 percent to 15,620 in Osaka.

The S&P GSCI Index of 24 commodities gained 0.1 percent. U.S. natural gas extended its three-day gain to 9 percent as forecasts showed a return to below-normal temperatures in that may erode inventories. Gas surged 5.5 percent yesterday, the most since April 29, after Citi Futures Perspective forecast a record drop in American stockpiles after last week’s cold weather.

Oil, Nickel

West Texas Intermediate oil advanced 0.9 percent to $92.59 a barrel on estimates that U.S. crude supplies dropped for a seventh week before a government report tomorrow.

Nickel rose 0.9 percent today in London, completing the biggest three-day rally since since August, on concern that global supplies will tighten during a ban on exports from Indonesia, the world’s biggest producer of the mined ore.

Gold futures for February delivery fell for the first time in four sessions, with futures losing 0.5 percent to settle at $1,245.40 an ounce in New York. Spot gold dropped 0.7 percent and silver retreated almost 1 percent.

Cattle futures touched a record in Chicago amid tight beef and animal supplies.

The Stoxx Europe 600 Index erased losses in the final 30 minutes of trading to close 0.2 percent higher at the strongest level since May 2008. The benchmark for European equities trades at 13.8 times its members’ projected earnings, more than the average over the last five years, after advancing 17 percent in 2013.

European Movers

Celesio AG slid 4.4 percent after McKesson Corp. said it failed to gain support from enough shareholders to enable it to buy the German drug wholesaler. Ashmore Group Plc plunged 12 percent as the asset manager said that clients withdrew a net $3.5 billion from its funds in the three months through December. Jeronimo Martins SGPS SA slipped 2.8 percent after the Portuguese retailer said that sales growth slowed in Poland.

“The risk in the European market is if profits don’t follow multiple expansion, as that makes the market expensive,” said Nathalie Martin-Pelras, who oversees the equivalent of $1.3 billion as chief investment officer at KBL Richelieu Gestion in Paris. “After 2013’s multiple expansion story, corporate results have to deliver in 2014.”

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